The Consumer Financial Protection Bureau said CashCall violated federal lending laws in at least eight states – Arizona, Arkansas, Colorado, Indiana, Massachusetts, New Hampshire, New York and North Carolina – nullifying borrowers’ obligation to pay back loans.

“Today we are taking action against CashCall for collecting money it had no right to take from consumers,” said Richard Cordray, director of the financial watchdog agency. “Online lending is rapidly growing and deserves ample regulatory attention. The Consumer Financial Protection Bureau will take action against online lenders and servicers that engage in unfair, deceptive, or abusive practices.”

The lawsuit seeks a court order that would require CashCall to refund money that was unlawfully collected from borrowers, plus additional penalties, and an order requiring CashCall to follow all laws in collecting from consumers.

Attorneys for CashCall issued a statement that said the lawsuit is an attempt by the Consumer Financial Protection Bureau to enforce interest rates, which it is not permitted to do. CashCall attorneys Neil Barofsky and Katya Jesting also said the lawsuit “needlessly duplicates … ongoing state enforcement actions.”

On its website, CashCall says that its lending practices are better than other short-term lenders.

“Short term lenders offer loans with APRs as high as 700% or worse,” CashCall’s website says. “By comparison, CashCall’s long-term installment loan APRs are often much lower, while also allowing for a longer repayment period. CashCall makes unsecured term loans with APRs that can range from 89.68% to 184.36%, depending on the size of the loan.”